California’s banking regulator closed SVB Financial Group’s Silicon Valley Bank on March 10 and asked federal authorities to sell the assets amid a run on the financial institution’s deposits. It was the second-biggest bank failure in U.S. history and stirred memories of the events that preceded the Great Recession in 2008 and 2009.
Tech was a good place to be for much of the past couple of decades. But it also meant that SVB had a lot of eggs in one basket. As inflation and interest rates soared last year, investors grew less willing to get behind companies that were putting growth ahead of profits, causing a chill among a set of companies that hadn’t had to work very hard to raise money during an extended period of ultra-low interest rates. That meant SVB didn’t have as much money coming in.
In the aftermath, some commentators dismissed comparisons to the 2008-09 financial crisis, given SVB’s troubles are related to mistakes by management and its overexposure to a single industry. However, regulators in New York state on March 12 closed
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